B-161434, JUN. 21, 1967

B-161434, JUN. 21, 1967

TO MR. ROBERT WEINBERGER:

WE REFER TO YOUR LETTER OF APRIL 25, 1967, REQUESTING REVIEW OF OFFICE SETTLEMENT OF FEBRUARY 1, 1967, WHICH DISALLOWED THE CLAIM OF YOUR CLIENT, MR. JOSEPH F. NIKI, FOR LIVING QUARTERS ALLOWANCE COVERING THE PERIOD OCTOBER 1, 1961, THROUGH JUNE 4, 1962, IN THE AMOUNT OF $1,894.43.

OUR DISALLOWANCE OF MR. NIKI'S CLAIM WAS PREDICATED PRIMARILY UPON AN ADMINISTRATIVE DETERMINATION MADE BY THE DEPARTMENT OF THE NAVY THAT DURING THE PERIOD OCTOBER 29, 1958, THROUGH JUNE 4, 1962, MR. NIKI WAS ENTITLED TO LIVING QUARTERS, INCLUDING UTILITIES IN THE GROSS AMOUNT OF $4,608.82. SINCE THAT AMOUNT WAS LESS THAN THE AMOUNT ($8,185.57) HE ALREADY HAD BEEN PAID FOR THE PERIOD OCTOBER 29, 1958, THROUGH SEPTEMBER 30, 1961, HE WAS NOT ENTITLED TO THE PAYMENT OF ANY LIVING QUARTERS ALLOWANCE FOR THE PERIOD OCTOBER 1, 1961, THROUGH JUNE 4, 1962. IN SUCH CONNECTION THE RECORD BEFORE OUR OFFICE SHOWS THAT ON OR ABOUT NOVEMBER 6, 1961, THE EMPLOYING ACTIVITY NOTIFIED MR. NIKI THAT HIS QUARTERS ALLOWANCE WOULD BE DISCONTINUED AS OF OCTOBER 1, 1961, PENDING EVIDENCE OF PURCHASE PRICE PAID OR INCURRED IN ACQUIRING SUCH QUARTERS. SEE NAVY CIVILIAN PERSONNEL INSTRUCTION (NCPI) 591, SECTION 3-4, EFFECTIVE JULY 1960 AND STANDARDIZED ALLOWANCE REGULATIONS 133.34 AND 132.5, EFFECTIVE APRIL 2, 1961. THE RECORDS BEFORE THIS OFFICE SHOW THAT FOR THE PERIOD OCTOBER 29, 1958, THROUGH SEPTEMBER 30, 1961, MR. NIKI WAS PAID A LIVING QUARTERS ALLOWANCE AT THE MAXIMUM RATE ($2,800 PER ANNUM). THIS ACTION APPARENTLY WAS BASED UPON AN APPRAISED VALUATION OF $25,520 COVERING THE PERSONALLY OWNED LIVING QUARTERS OF MR. NIKI, PLUS UTILITY COSTS. HOWEVER, IN 1961 AN ADMINISTRATIVE DETERMINATION WAS MADE THAT SUCH QUARTERS ALLOWANCE SHOULD HAVE BEEN PREDICATED UPON A PURCHASE PRICE VALUATION OF THE PERSONALLY OWNED QUARTERS OF $9,703.74. THAT ADMINISTRATIVE DETERMINATION WAS MADE BY THE OFFICE OF INDUSTRIAL RELATIONS, THE ACTIVITY IN THE NAVY DEPARTMENT DESIGNATED TO ADMINISTER THE OVERSEAS ALLOWANCE PROGRAM OF THAT DEPARTMENT AND WAS BASED IN PART UPON LAND COSTS OF $1,695.10 AND CONSTRUCTION COSTS (CASH) PAID MR. MIYAKE IN THE AMOUNT OF $7,008.64. THE VALUATION FIGURE ($9,703.74) APPROXIMATES A VALUATION ($9,755.46) PLACED ON THE PROPERTY BY A MR. AIKO, A CONTRACTOR AND ARCHITECT, WHO WAS FAMILIAR WITH THE DWELLING AT THE TIME OF ITS CONSTRUCTION.

YOU POINT OUT FIRST THAT THE COST EVALUATION OF $9,703.74 UTILIZED BY THE NAVY IS IN ERROR IN THAT THE AMOUNT PAID MR. MIYAKE DID NOT INCLUDE ALL COSTS OF THE PERSONALLY OWNED QUARTERS AND THAT THE APPRAISED VALUATION OF $25,520 MORE ACCURATELY REFLECTS THE COST ACTUALLY INCURRED IN CONSTRUCTION OF THE QUARTERS. SECONDLY, YOU POINT OUT THAT EVEN IF THE APPRAISED VALUATION WHICH WAS ACCEPTED FOR THE PERIOD OCTOBER 29, 1958, THROUGH SEPTEMBER 30, 1961, WAS INCORRECT, THE NAVY COULD NOT ARBITRARILY CHANGE THE EVALUATION CRITERIA. FINALLY YOU EXPRESS DOUBT WHETHER THE EVALUATION CRITERIA ULTIMATELY ACCEPTED BY THE NAVY IS IN ITSELF CORRECT.

YOU QUOTE FROM SECTION 132.5 OF THE STANDARDIZED REGULATIONS (GOVERNMENT CIVILIAN, FOREIGN AREAS) PROMULGATED BY THE DEPARTMENT OF STATE AS FOLLOWS:

"EVIDENCE OF THE PURCHASE OF PERSONALLY OWNED QUARTERS SHALL BE IN THE FORM OF THE RECEIPTS FOR PAYMENT, OR BONA FIDE PROOF OF THE INITIAL PURCHASE PRICE.'

UNDER THE ABOVE REGULATION AN APPRAISAL OF CURRENT MARKET VALUE FREQUENTLY WOULD NOT CONSTITUTE A REASONABLE MEASUREMENT OF THE PURCHASE PRICE OF QUARTERS, PARTICULARLY IF SUCH APPRAISAL IS NOT MADE IMMEDIATELY AFTER COMPLETION OF THE CONSTRUCTION OR IS NOT MADE UNTIL AFTER THE LAPSE OF A SUBSTANTIAL PERIOD FOLLOWING THE ACQUISITION OF THE LAND. IN THAT CONNECTION THE RECORD INDICATES THAT THE $25,520 VALUATION OF THE PROPERTY TO WHICH YOU REFER WAS MADE SOME YEARS AFTER THE CONSTRUCTION OF THE PROPERTY WAS COMPLETED AND AFTER A PERIOD OF CONSIDERABLE INFLATION IN THE JAPANESE ECONOMY. THUS, THE USE OF THAT VALUATION FOR THE PURPOSE OF COMPUTING A QUARTERS ALLOWANCE WOULD BE INCONSISTENT WITH THE REGULATION. THAT VIEW IS REFLECTED IN THE ADMINISTRATIVE REGULATIONS OF THE DEPARTMENT OF THE NAVY TO THE EFFECT THAT A QUARTERS ALLOWANCE SHOULD BE DETERMINED ON THE BASIS OF THE INITIAL PURCHASE PRICE PAID OR THE APPRAISED VALUE OF THE QUARTERS AT THE TIME THE EMPLOYEE OR HIS SPOUSE, OR BOTH, ACQUIRED TITLE THERETO.

MOREOVER, WE NOTE THAT UNDER THE CONTROLLING REGULATIONS THE PAYMENT OF A LIVING QUARTERS ALLOWANCE IS DISCRETIONARY WITH THE EMPLOYING AGENCY. SEE SECTION 031.1 OF THE STANDARDIZED REGULATIONS. ALSO, SECTION 134.2 OF SUCH REGULATIONS, WHICH WAS IN EFFECT AT THE TIME THE NAVY ADVISED MR. NIKI THAT HIS QUARTERS ALLOWANCE WOULD BE DISCONTINUED, SPECIFICALLY PROVIDED AS FOLLOWS:

"A.REGARDLESS OF ANY OTHER PROVISION OF THESE REGULATIONS, THE HEAD OF AGENCY IS REQUIRED TO AUTHORIZE PAYMENTS OF LESS THAN THE FULL AMOUNT OF AN LQA OR TO WITHHOLD PAYMENT ALTOGETHER.

"/5) WHEN ANY OTHER CIRCUMSTANCE MAKES A LOWER PAYMENT PROPER IN THE JUDGMENT OF THE HEAD OF AGENCY * * *

THE HEAD OF AGENCY SHALL TAKE SUCH STEPS AS HE MAY DETERMINE NECESSARY, INCLUDING INSPECTION OF QUARTERS, IN THE IMPLEMENTATION OF THIS PROVISION.'

ON THE BASIS OF THE PRESENT RECORD, WE ARE UNABLE TO SAY THAT THE METHOD OF THE DEPARTMENT OF THE NAVY IN ARRIVING AT THE PURCHASE PRICE OF MR. NIKI'S QUARTERS WAS UNREASONABLE OR THAT ITS ACTION IN THE MATTER OTHERWISE WAS ARBITRARY. ACCORDINGLY, OUR SETTLEMENT OF FEBRUARY 1, 1967, IS SUSTAINED.